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Asia Development Bank urges Nepal to sign pacts by Aug

Publication Date : 11-08-2014


Asian Development Bank (ADB), a key financer for the 140MW Tanahun Hydropower Project, has urged the government to conclude the signing of subsidiary loan agreement with Nepal Electricity Authority (NEA) and subsidiary financing agreement between NEA and the project within August.

As loan agreements signed with project financers one and half years ago have yet to be mobilised, ADB asked the government to expedite the process so that the project could move ahead.

Key financing partner Japan International Cooperation Agency (JICA) first signed the agreement in March 2013, and ADB and European Investment Bank signed other loan agreements in April and May,  respectively.

The second agreement with EIB was recently signed after a loan deal could not be reached with Abu Dhabi Fund for Development (ADFD) that had committed $30 million.

In an emailed response to the Post, ADB said it asked the government to expedite the process of subsidiary loan and financing deals among the government agencies.

Kenichi Yokoyama, and ADB Country Director for Nepal said: “The loan is still not effective (after one year plus) due to delay in signing financing agreements within the Nepal government and others. ADB has asked the government to expedite the process so that this very important project moves forward.”

He said Tanahu Hydropower project will help expand the access to clean and sustainable energy in Nepal by developing a medium-sized hydropower plant (140 MW) with water storage facility.

A finance ministry official said the delay in convincing Abu Dhabi Fund for Development (ADFD) to sign the loan agreement without Nepal’s parliamentary approval delayed the loan negotiation. ADFD had demanded that the parliament had to ratify the loan deal.

The government later decided not to take loans from ADFD and signed a second loan deal with EIB to finance half of the ADFD-committed amount. The Nepal government will share the remaining half.

Now, the finance ministry and NEA have to sign subsidiary loan agreement to enable NEA to get financing for the project.

NEA’s officiating managing director Ram Chandra Pandey said NEA has already signed subsidiary loan pacts committed by ADB, JICA and EIB, but it is yet to sign a deal with the finance ministry on the government’s second loan agreement with EIB.

“We have already prepared a template for the subsidiary loan agreement with the finance ministry,” said Pandey. “After the public holiday on Monday is over, we will talk with the ministry officials and reach an agreement.”

After the subsidiary loan agreement, NEA and Tanahun project should sign subsidiary financing agreement to release the budget.

“Few such agreements have already been signed and a few are remaining,” said Tanahun Hydro Project managing director Sunil Kumar Dhungel. Government officials said ADB has been concerned about the delay. “ADB officials here are saying they are also under enormous pressure from the headquarters to make the loan effective,” said the finance ministry official.

For the $505 million project, ADB has pledged $150 million, JICA ($147 million) and EIB 55 million ($76 million). The project is expected to be completed in 2020.


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